Income Tax Rates (FY 2078-79)
1. Personal Income Tax
1.1 For Residents : Natural Person
| Particulars | Rs. | Tax Rate |
|---|---|---|
Assessed as Individual | ||
| Upto | 4,00,000 | 1% |
| Next | 1,00,000 | 10% |
| Next | 2,00,000 | 20% |
| Next | 13,00,000 | 30% |
| Balance Exceeding | 20,00,000 | 36% |
Assessed as Couple | ||
| Upto | 4,50,000 | 1% |
| Next | 1,00,000 | 10% |
| Next | 2,00,000 | 20% |
| Next | 12,50,000 | 30% |
| Balance Exceeding | 20,00,000 | 36% |
- The Social Security Tax (1%) is to be deposited in a separate revenue account (11211) provided for this purpose.
- However, tax payer registered as sole proprietorship or on pension income or person contributing to contribution based pension fund shall not attract social security tax i.e. 1%.
- 36 % is computed as 30% plus additional 20% on such tax rate applicable to taxable income above Rs 2,000,000.
A. Deductions on Income |
|
| Natural person working in remote areas entitled for Remote Area Allowance | Additional deduction from taxable amount up to Rs 50,000. (A-50,000, B-40,000, C30,000, D-20,000, E-10,000). |
| Natural person with pension income included in the taxable income | Additional deduction from taxable amount equal to 25% of amount prescribed under first tax slab or actual pension receipts whichever is lower. |
| Incapacitated natural person | Additional deduction from taxable amount equal to 50% of amount prescribed under first tax slab or actual income whichever is lower. |
B. Reduction on Income |
|
| Life Insurance Premium | A natural person who has procured life insurance and paid premium amount thereon shall be entitled to a reduction of actual annual insurance premium or Rs 25,000 whichever is lower from taxable income |
| Medical Insurance | A natural person who has insured with resident insurer/insurance company for health insurance shall be entitled to a reduction of actual premium paid or Rs 20,000 whichever is lower. |
| Contribution to Retirement Fund | 1/3rd of taxable income or Rs 300,000 or Actual contribution whichever is lower. |
C. Rebate on Tax Rates |
|
| In case of resident individual women having only remuneration income | Rebate of 10% on the tax liability calculated as other natural person. i.e. not applicable for women with couple status. |
| Retirement payment resulting from Merger | In case of decision of the organization to provide group retirement to its employees (in the event of merger or acquisition) except to the payment made as per the employment term or the payment made by retirement fund, a rebate of 50% on withholding tax. |
D. Foreign Allowances |
|
| In case of the employee employed at the foreign diplomatic mission of Nepal | Only 25% of the foreign allowances are to be included in the income from employment. |
E. Tax Exemption |
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| Compensation received against deceased natural person | Compensation received against the deceased of natural person is not required to be included in income. |
F. Rebated on tax liability |
|
| Foreign tax credit |
If any resident person has paid tax on income outside Nepal, such person can claim foreign tax credit and while claiming such credit each country has to be considered separately. Amount of credit shall be lower of i. Total foreign income included in assessable income in Nepal as multiplied by the average rate of tax on total income or ii. Actual tax paid in foreign country. |
| Medical Tax Credit |
Resident Natural Person is entitled to Medical Tax Credit at least of following amounts
i. Rs 750 or ii. 15% of Medical Expenses along with any carried forward from previous year or iii. Actual tax liability |
G. Compulsory Filing of Return |
|
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- A natural person with only gains from disposal of Non Business Chargeable Assets (NBCA), may opt not to file the income tax return under Section 96. - Natural person other than sole proprietor with income solely from income from vehicle on hire not required to file the income tax return. - However, a natural person having taxable income exceeding Rs 4 million during an Income Year shall submit income return under Section 96. |
|
1.2 For Non-Residents
| Nature of Transaction | Tax Rates |
|---|---|
| Income earned from normal transactions | 25% flat rate |
| Income earned providing shipping, air or telecom services, postage, satellite and optical fiber project | 5% |
| Income earned providing shipping, air or telecom services through the territory of Nepal | 2% |
| Repatriation of profit by Foreign Permanent Establishment | 5% |
1.3 Special provisions for Resident Natural Person
| Particulars | Tax Rates |
|---|---|
| Income earned by natural person engaged on special industry under Section 11 for whole year | Tax @ 20% on taxable income for which tax rate of 30% is applicable. |
| Income earned from export by natural person | Tax @ 15% on taxable income for which tax rates of 20% and 30% applicable |
| Taxable income of a trust: - acquiring an estate of a deceased resident individual; or - of an incapacitated resident individual for an income year. |
Tax rate as applicable to Natural Person. |
2. Business Income Tax
2.1 Tax rates for Entity- Company/Firm/Industry
| # | Particulars | Normal Rate | Consession | Applicable Rate* |
|---|---|---|---|---|
| 1 | Normal business | 25% | 25% | |
| 2 | Entity operating as Special Industry under section 11 for whole year | 25% | 20% | 20% |
| 3 | Other entities involved in business of operating (after construction) of ropeway, cable car, railway, tunnel or sky bridge | 25% | 20% | 20% |
| 4 | Entity investing and operating trolley bus or trams | 25% | 52% | 12% |
| 5 | Entity involved in construction and operation of airport | 25% | 40% | 15% |
| 6 | Entity operating trolley bus or trams | 25% | 20% | 20% |
| 7 | On transactions of cooperatives (other than tax exempted transactions) registered under Cooperative Act, 2074) (sub-metropolitan/metropolitan cities, respectively) | 20% | 50% | 20% |
| 8 | On transactions of cooperatives (other than tax exempted transactions) registered under Cooperative Act, 2074) (municipality) | 20% | 75% | 5% |
| 9 | Taxable income of Export of entity having income source from Nepal | 25% | 20% | 20% |
| 10 | Entity those involved in construction or operation of public infrastructure and to be transferred to Nepal Government or involved in construction of hydropower house and its generation and transmission. | 25% | 20% | 20% |
| 11 | Entity involved in the construction and operation of road, bridge or tunnelway | 25% | 52% | 12% |
| 12 | Banks and financial institutions (Commercial Banks, Development Banks and Finance Companies) | 30% | - | 30% |
| 13 | Entity carrying General insurance business (Non-life Insurance) | 30% | - | 30% |
| 14 | Entity engaged in petroleum business under Nepal Petroleum Act, 2040 | 30% | - | 30% |
| 15 | Entity engaged in business of cigarette, tobacco, cigar, chewing tobacco, pan masala, alcohol and beer | 30% | - | 30% |
| 16 | Entity engaged in Telecommunication and Internet service | 30% | - | 30% |
| 17 | Entity engaged in Money transfer | 30% | - | 30% |
| 18 | Entity engaged in Capital market business, Securities business, Merchant banking, Commodity future market, Securities and Commodity broker | 30% | - | 30% |
By Finance Act 2019-20, tax rates of special industry, entities involved in the operation business of road, bridge, tunnel, ropeway, railway, or sky bridge; operation of trolleybus and tram; export business, construction of infrastructures and construction, production, and distribution of electricity has been removed from the Schedule -1 of the Income Tax Act, 2058. Normal tax rate applicable to the above entities is 25%. However, these entities can avail various concessions given under Section 11 of the Act.
*Above industry-wise applicable tax rate is presented after considering concession available under section 11 of Income Tax Act (ITA) except entities falling under tax holiday period. However, in case of special industry and industry other than presented above, entity can choose any one tax concession available under section 11 of ITA (point 2.2 below).
2.2 Tax Concessions and Rebate on Business Income
In the given section, AR stands for Applicable Rate which should be used in the context of Special Industry as the rate after 20% concession given under Section 11(2Kha) and NR stands for Normal Rate in the context of Industry / business other than Special Industry
| # | Particulars | Consession |
|---|---|---|
| 1 | Concessions based on employment provided | |
| Special industries and information technology industries providing direct employment to 100 or more Nepalese citizens throughout the year | *10% of AR / NR | |
| Special industries and information technology industries providing direct employment to 300 or more Nepalese citizens throughout the year | *20% of AR / NR | |
| Special industries and information technology industries providing direct employment to 500 or more Nepalese citizens throughout the year | *25% of AR / NR | |
| Special industries and information technology industries providing direct employment to 1000 or more Nepalese citizens throughout the year | *30% of AR / NR | |
| * Additional 10% concession is provided if direct employment is provided to 100 or more Nepalese citizens including at least 33% of women, oppressed or handicapped person. | ||
| 2 | Concessions to Special industries based on locations | |
| Special industries established in very undeveloped areas | 90% of the AR (for 10 yrs from the year of establishment) | |
| Special industries established in undeveloped areas | 80% of the AR (for 10 yrs from the year of establishment) | |
| Special industries established in under developed areas | 70% of the AR (for 10 yrs from the year of establishment) | |
| 3 | Concessions to Special industries based on investment amount | |
| Special industry with capital of Rs 1 billion or more and providing direct employment to more than 500 persons throughout the year | 100% exemption for first five years from the date of operation of business and 50% concession for next 3 years | |
| For special industry existing at the advent of this Section, if capital is increased to Rs 1 billion, installed capacity is increased by 25% and provided direct employment to more than 500 persons throughout the year | 100% concession for first 5 years and 50% concession for next 3 years on income generated due to increased capacity | |
| Industry related to tourism industry or international flight operation established with capital investment of more than Rs 2 billion | 100% concession for 5 years from commencement of business and 50% concession for next 3 years | |
| For industry related to tourism industry or international flight operation existing at the advent of this Section, if capital is increased to Rs 2 billion and installed capacity is increased by 25% at minimum | 100% concession for 5 years and 50% concession for next 3 years on income generated due to increased | |
| 4 | Concessions to industry established in SEZ | |
| Industry established in 'Special Economic Zone' in mountain areas or hill areas by the GON | 100% exempt up to 10 yrs from date of operation of business and 50% rebate in subsequent years | |
| Industry established in 'Special Economic Zone' other than above locations | 100% exempt up to first 5 yrs from date of operation and 50% rebate in subsequent years | |
| Dividend distributed by the industry established in special economic zone | 100% exempt for first 5 years and 50% rebate in subsequent 3 yrs | |
| Income derived by the foreign investors from investment in ‘Special Economic Zone’ (Source of income-use of foreign technology, management service fee and royalty) | 50% of NR | |
| 5 | Concessions based on establishment in special area | |
| Entity established in Technology park, Bio tech park and IT Park engaged in Software development or, data processing or, Cyber Café or, Digital Mapping | 50% on NR | |
| 6 | Concession related to hydropower project | |
|
Person or entity having license to generate, transmit or distribute electricity shall be provided concession if the commercial operation commences before BS 2080 Chaitra End. (Provisions shall be applicable for electricity generated from solar, wind or organic material) |
100% exempt up to 10 years and 50% rebate in subsequent 5 years | |
| 7 | Concession to Petroleum Industry | |
| If person involved in exploration and extraction of petroleum, natural gas and starts commercial operation by BS 2080 Chaitra end. | 100% exempt up to 7 years and 50% rebate in subsequent 3 years | |
| 8 | Other Specific concessions | |
| On capitalization of accumulated profit through bonus share by Special Industry or industry related with tourism for expansion of capacity of industry | No tax on dividend distribution | |
| Income from export of manufactured goods by Manufacturing Industries | Additional Concession of 25% on rate derived after normal concession | |
| Income of Manufacturing Industry, tourism service industry and hydropower generation, distribution and transmission industry listed in capital market and entities mentioned in section 11 (3 Ga) | 15% on AR/NR | |
| Private company with capital of Rs 50 crore or more which conducts its operation by converting into public company | 10% on AR / NR for 3 years from the date of conversion | |
| Domestic tea production and processing industry, Dairy industry, Garments industry | 50% on AR | |
| Health institution operated by community based organization | 20% on NR | |
| Micro entrepreneurial industry |
100% on NR for 5 years from the date of operation if it is under entrepreneurship of woman concession of 100% on NR for 7 years from the date of operation |
|
| Industry established in least developed areas producing brandy, wine, cider from fruits | 40% on NR for 10 years | |
| Royalty from export of intellectual asset by a person | 25% on NR | |
| Income from sale of intellectual asset by a person through transfer | 50% on NR | |
- If any entity is entitled to more than one benefit under section 11 of the Income Tax Act, 2058 only one benefit shall be availed. However, in case of Special Industries, apart from the concessions of 20% given in section 11(2Kha), any one of other benefits available in section 11 can also be availed.
- Special industry” refers to all the manufacturing industries as classified in section 3 of the Industrial Enterprises Act, 2073 except the industry related to the manufacturing of cigarette, bidi, cigar, chewing tobacco, tobacco, gutkha, pan masala other products having main ingredient as tobacco, alcohol, beer and other such related products but includes agriculture, forestry and mineral industries
- Up to FY 2075-76, cooperatives carrying out transactions other than exempted transaction were liable to tax @20% and this included financial transactions as well. However, from FY 2076-77, only for financials transaction, tax concessions have been granted.
- In FY 2075-76, the normal rate applicable for income from special industries operating for a whole year and income from export was 20% as per Schedule 1, however, in FY 2076-77, the normal rate is 25% with 20% concession, that will result in applicable tax rate of 20%.
Note:-
3. Allowable Deductions
| # | Particulars | Deduction |
|---|---|---|
| a | Donation to tax exempt organization | Up to Rs 100,000 or 5% of adjusted taxable income whichever is lower. |
| b |
For conservation or promotion of historical, religious or cultural heritage, or for construction of public sports infrastructure On prior approval of department |
Actual up to Rs 1 million or 10% of assessable income whichever is lower. |
| c | Contribution to Prime Minister Relief Fund or National Reconstruction Fund established by Nepal Government | Actual amount of contribution |
4. Presumptive Taxation
4.1 Vehicle Tax
| Particulars | Tax Amount |
|---|---|
| Vehicle Tax (Note *) | |
| Minibus, Mini Truck, Water Tanker | Rs 6,000 |
| Mini Tripper | Rs 7,000 |
| Truck and Bus | Rs 8,000 |
| Dozer, Excavator, Roller, Loader, Crane and similar machineries | Rs 12,000 |
| Oil tanker, Gas bullet, Tipper | Rs 12,000 |
| Car, Jeep, Van, Micro Bus | |
| (a) 0 to 1300 cc | Rs 4,000 |
| (b) 1301 to 2000 cc | Rs 4,500 |
| (c) 2001 to 2900 cc | Rs 5,000 |
| (d) 2901 to 4000 cc | Rs 6,000 |
| (e) 4001cc and above | Rs 7,000 |
| Three Wheeler, Auto Rickshaw, Tempo | Rs 2,000 |
| Tractor | Rs 2,000 |
| Power Tiller | Rs 1,500 |
*Schedule 1(1) (13): If the owner of the vehicle is a natural person (other than registered individual firm), the tax so paid shall be final.
4.2 Resident natural person/Private Firms having business income upto Rs 30 Lacs [section 4(4)]
| Particulars | Tax Amount |
|---|---|
| Metropolitan, Sub-Metropolitan | Rs 7,500 |
| Municipal Areas | Rs 4,000 |
| Other than municipal areas | Rs 2,500 |
Note: Conditions for turnover taxation[section 4(4)]:
This includes the resident natural person meeting the following criteria:
(a) Annual transaction not more than Rs 30 Lacs and annual profit up to Rs 300,000.
(b) Only Nepal source income from business in that fiscal year.
(c) Medical credit not claimed under Section 51.
(d) Advance tax not claimed under Section 93.
(e) Not registered in VAT.
(f) has opted to tax under presumptive Basis.
This includes the resident natural person meeting the following criteria:
(a) Annual transaction not more than Rs 30 Lacs and annual profit up to Rs 300,000.
(b) Only Nepal source income from business in that fiscal year.
(c) Medical credit not claimed under Section 51.
(d) Advance tax not claimed under Section 93.
4.3 Resident natural person/Private Firms having business income exceeding Rs 30 Lacs but less than Rs 1 Crore [section 4(4ka)]
While computing tax on transaction, tax up to Rs 30 Lacs shall be computed as above table [section 4(4)] and on remaining transaction amount, tax shall be calculated on the basis of rates mentioned below.
| Natural person engaged in | Tax Rates |
|---|---|
| Gas, cigarette business doing transaction with 3% margin or commission | |
| - Turnover from 30 Lacs to 50 Lacs | 0.25% of transaction amount |
| - Turnover from 50 Lacs to 1 Crore | 0.3% of transaction amount |
| Other person except those involved in business as above | |
| - Turnover from 30 Lacs to 50 Lacs | 1% of transaction amount |
| - Turnover from 50 Lacs to 1 Crore | 0.8% of transaction amount |
| Person engaged in service business except doctor, engineer, auditor, player, actor or consultants | 2% of transaction amount |
Note: Conditions for turnover taxation[section 4(4ka)]:
(a) Person having income from business only.
(b) Having turnover of business more than Rs 30 Lacs but less than Rs 1 Crore.
(c) Natural person not having income from consultancy or specialized services such as those provided by doctor, engineer, auditor, lawyer, player, actor or consultants.
(d) Person not registered with VAT.
(a) Person having income from business only.
(b) Having turnover of business more than Rs 30 Lacs but less than Rs 1 Crore.
(c) Natural person not having income from consultancy or specialized services such as those provided by doctor, engineer, auditor, lawyer, player, actor or consultants.